Rostenkowski: Freeze U.s. Spending For Year

March 12, 1990|By Elaine S. Povich, Chicago Tribune.

WASHINGTON — Rep. Dan Rostenkowski, challenging both the Republican administration and his own Democratic Party leaders, Sunday proposed to balance the federal budget by freezing government spending for a year, including Social Security payments, and raising taxes on the rich.

The Illinois Democrat, chairman of the House Ways and Means Committee and the nation`s top tax-law writer, also called for higher taxes on gasoline, liquor and tobacco to help cut the federal budget deficit.

While he has made similar recommendations in the past, Rostenkowski`s proposals Sunday marked the first time he has presented a comprehensive plan of tax increases and spending limits to eliminate the deficit.

His approach runs counter to President Bush`s ``no new taxes`` pledge and challenges various Democratic and Republican proposals to cut taxes. Bush wants to cut the tax paid on capital gains, the levy assessed on income from sales of assets like stocks and bonds. Sen. Daniel Moynihan (D-N.Y.) has proposed cutting the tax that finances Social Security. Other Democrats have suggested an expansion of tax-deferred retirement accounts, which would lose revenue in the short run.

``Here`s my challenge: Adopt my plan to fix the budget deficit-or come up with a better one,`` Rostenkowski wrote in an opinion column in the Washington Post.

``No smoke and mirrors; no `feel good` promises or slide-by budgeting; no picking out one or two small-potato items that wouldn`t make a perceivable dent in the deficit ...``

The most controversial part of Rostenkowski`s plan would freeze Social Security payments, eliminating scheduled cost-of-living increases, as part of a one-year freeze on nearly all domestic spending.

Senior citizens groups have opposed such efforts in the past, saying that a cost-of-living freeze amounts to a cut in benefits.

In addition to the spending freeze, Rostenkowski proposed a 3 percent cut in defense spending from this year`s level.

In his tax-the-rich proposal, Rostenkowski would extend the highest tax rate, 33 percent, to the wealthiest Americans.

Currently, families with incomes between $78,400 and $185,730 pay a 33 percent tax rate. But those with higher incomes pay only 28 percent.

``It is absolutely ludicrous that people with incomes in the millions now have a lower marginal tax rate . . . than people earning $70,000, `` he said. He also called for repealing the Gramm-Rudman-Hollings balanced-budget law and a one-year freeze of inflation adjustments in the tax code, including the indexing of personal exemptions and brackets, but excluding the earned income tax credit for poor families.

``Gramm-Rudman is a crutch, a collective confession of our inability to lead and our unwillingness to face up to our responsibilities,`` Rostenkowski said.

In an interview on CBS-TV`s ``Face the Nation,`` he said he envisioned the tax on gasoline rising from 9 cents a gallon to between 20 cents and 25 cents.

While he did not indicate how much he would raise taxes on tobacco and alcohol, he said such increases combined with a gasoline tax hike could raise a total of $100 billion in new revenues.

Rostenkowski acknowledged his proposals will shake up both Democrats and Republicans.

``I`m sure that I`ll be verbally hazed by both Democrats and Republicans,`` he said in the interview.

The hazing, if there is to be any, was absent Sunday. House Speaker Thomas Foley (D-Wash.), who has said the tax-the-rich plan is merely one of a number of options being studied, was unavailable for comment.

A spokesman for House Majority Leader Richard Gephardt (D-Mo.), who has headed a task force on the Social Security tax, said the No. 2 Democrat in the House would wait until Monday to comment.

At the White House, spokesman Jay Allison said, ``We don`t have any response on that.``

An aide to Foley said the speaker was shown a copy of Rostenkowski`s proposal before he made it.

The speaker did not endorse the plan but also did not dissuade Rostenkowski from making it, the aide said.

Rostenkowski said his plan would reduce the federal deficit by more than $500 billion over the next five years and produce a budget surplus in 1994 and 1995.

The current budget deficit is estimated in the $150 billion range for this fiscal year, but its true size is masked by a surplus in the Social Security trust fund.

Rostenkowski also called for earmarking the so-called ``peace dividend,`` the money saved in the defense budget due to easing of East-West tensions, for reducing the deficit.

He said if the government decides to spend more money on such matters as aiding Poland or funding the drug war, some other program should be cut back by a like amount.

The last time Social Security benefits were frozen was in 1983, and then for only six months.

Senate Republicans made an abortive try at freezing the cost-of-living adjustment a couple of years later, but had the rug pulled out from under them by then-President Ronald Reagan, who declined to go along.

Rostenkowski, 62, rejected a suggestion that only someone who was at the end of his political career would make such a proposal.

``First of all, I`m not retiring, and secondly I hope I`m laying a blueprint for the future,`` said the 16-term incumbent.